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News Corp up on Telepiu deal
SYDNEY, Australia -- Shares in Rupert Murdoch's media giant News Corp jumped in Australian trade Wednesday after it wrapped up a deal to buy the Italian pay TV business Telepiu. News and its partner Telecom Italia will pay 893 million euros ($882 million), including 423 million euros in assumed debt, to French conglomerate Vivendi Universal for the loss-making Telepiu. The price was lower than expected. News Corp shares rose about 4.5 percent in early Australian trade to A$9.24, mirroring a 4.6 percent gain in its New York-traded ADRs, before closing 2.5 percent higher at A$9.07. Analysts welcomed the lower price achieved by News Corp. in its negotiations with Vivendi. "While this transaction is expected to require a near-term cash outflow of roughly $1 billion (including News Corp's $550 million investment), we believe in the long-term strategic value of being the sole pay-TV operator in Italy," Merrill Lynch analyst Jessica Reif Cohen said in a research note. Dominant operatorUnder the deal, News Corp group will own an 80 percent stake in Telepiu, while Telecom Italia -- its partner in Telepiu rival Stream -- will control the remainder. Telepiu and Stream will merge to create Sky Italia, with a formal launch in July 2003. The new company will be Italy's dominant pay-TV operator, assuming the purchase wins approval from European Commission regulators. Tom Mockridge, the News Corp executive who moved two months ago to Stream from heading the group's newspapers and Sky television operations in New Zealand, will run the new Italian venture. Vivendi and News Corporation had been in talks concerning Telepiu for months, but progress was delayed by disagreements over the value of the unit and by threats of law suits between them. These stem from a failed deal to merge their Italian pay-TV operations. "This is a world class property in an untapped market without cable competition," Murdoch told an investors' conference in New York. "We would expect to see immediate subscriber growth, the elimination of piracy, and compelling programming." Replacement CEO
In July, Vivendi -- the world's second largest media group -- named Jean-Rene Fourtou to replace chief executive Jean-Marie Messier. Vivendi is struggling with debts of about 19 billion euros built up after Messier's two-year multi-billion-euro spending spree to create a media group to rival AOL Time Warner. Last week, Vivendi said it would sell assets worth 12 billion euros over the next 18 months. Fourtou was quoted on Tuesday as telling trade union representatives in Paris that he was impressed with an offer from magazine publisher Lagadere for Vivendi's publishing business. "Jean-Rene Fourtou told us that Lagardere made the offer that interested him most," Elisa Perrot, representative of the CGT trade union, told reporters following a union meeting on strategy with Fourtou. However, Vivendi later denied that Fourtou had characterised the Lagardere offer as the most attractive.
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